IQDY aims to capture three attributes that don't always go together: high earnings quality, high dividends, and higher market risk. Quality and dividends often go hand in hand, but these traits are often associated with defensive plays rather than dynamic exposure. The index has a bias on large-caps by selecting its constituents from its parent index, Northern Trust International Large Cap Index but it may also invest in mid-cap stocks. Securities ranking in the lowest quintile of quality, as well as those which do not pay a dividend are excluded. Quality is scored using a proprietary methodology based on management efficiency, profitability, and cash flow. The remaining securities are optimized based on quality, dividend yield, and higher beta (1-1.5x higher than the parent index). The index is reconstituted quarterly starting each February.
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